The Shanghai Lawyer
Vol. 1 , No. 12 - October 16, 2002
Shanghai is one of the most dynamic and fastest growing mega-cities in the world. It is quickly establishing itself as the leading financial and economic center of the Far East, on par with the likes of Paris and New York. The Shanghai Lawyer is a bi-weekly publication providing up-to-date newsworthy articles and legal information to professional and business persons around the world. We hope you enjoy the newsletter and welcome your comments and feedback.
Did you know?
Every day 170 new private enterprises register in Shanghai. The proportion of local GDP generated by private companies versus their state owned counterparts is becoming higher and higher as these companies expand exponentially with the new economic opportunities. |
Living in Shanghai
China's weeklong national holiday held during the first week of October has allowed all us hard workers the opportunity to recharge our batteries and get some much needed R & R. Originally started a couple of years ago to kick start consumerism in China to counteract the effects of the Asian crisis, the weeklong holiday has become the equivalent to Japan's Golden Week. In fact, it turned out to be so successful that the government decreed a second Golden Week to coincide with the May 1st workers' holiday. Now we have a weeklong holiday in spring, autumn and also the Chinese New Year holiday in winter.
The holiday provides an opportunity for those of us spend all our days indoors to jet away to some exotic South East Asian destination to get some sun, hang out on the beaches, sip G&Ts or whatever. I used the week to visit the ancient cities of Dali and Lijiang in Yunnan Province located in southwest China. This region has to be one of the most beautiful places in China with 5,000m peaks, trees, lakes, waterfalls and most importantly fresh air and no crowds. The local Naxi and Bai minorities are the dominant cultures in this part of China which presents a sharp contrast to the average Han Chinese. The food was spicy the weather warm and the break was just what the doctor ordered. Can't wait till the next break.
Blaine Turnacliff
Shanghai property bubble alert
Shanghai's municipal government has been recommended to introduce measures to curb the city's real-estate boom following a warning by its consumer watchdog of the emergence of a ``property bubble''.
The watchdog agency, the Shanghai Consumer Price Bureau cited three reasons for concern:
1) 53 per cent of home buyers are from other provinces or overseas, and many bought properties in the city for investment;
2) property developers have created an atmosphere of strong demand; and
3) large numbers of local residents have bought apartments or houses as investments.
In the first quarter of this year, property prices rose 30 per cent year on year. Prices of high-end properties rose by as much as 100 per cent, with buyers from overseas, other provinces and Shanghai each accounting for a third of the market.
Buyers have been queuing or hiring people to queue for them, to buy high-end residential properties. However, leasing prices have declined, a sign of weakening demand. The price of villas along central Huaihai Road dropped to US $4,000 per sq m from a peak of US $7,000 per sq m a few years ago.
At the same time, supply is massive. At the end of July, developers had 100 million sq m of residential and commercial property projects under way, of which 80 per cent was high-end residential. Although there were indications Shanghai's property market was overheating, the city was not ready for measures to curb prices.
In its five-year (2001-2005) plan, the city made property one of its six pillar industries, with each sector expected to contribute 10 per cent to the municipal gross domestic product (GDP). Last year, property accounted for 6.23 per cent of GDP, well below authorities' expectations. On the other hand, Shanghai has pocketed more than US$10 billion from land sales in the past few years, giving the city an important source of revenue for its infrastructure projects.
The property boom has also fuelled growth in the banking sector. In the first half of this year, total property mortgage loans from commercial banks in Shanghai surged 2.3 billion USD - up 30 per cent year on year. During the same period, new personal mortgage loans (2.6 billion USD ) accounted for 88 per cent of total property sales (3 billion USD) - an indication that banks had relaxed mortgage rules to compete for customers. Mortgages are usually capped at 80 per cent of a property's price. If property prices fluctuate, the ability of some investors to pay their debts might be affected. Shanghai Academy of Social Science economist Yang Jianwen warned that a drop in prices would have an impact on the banking sector. A 25 per cent drop, for instance, would result in a 3 per cent rise in non-performing loans, he said.
In a recent research report, the Bank of China said the property market nationwide had entered a "cautious stage" and urged banks to be selective when issuing new property development loans.
(Source: The Standard)
Shanghai Essentials
New rules have been unveiled allowing for foreign investors to acquire controlling stakes in domestic companies listed in the Shanghai stock exchange. The rules provide for equal treatment for foreign and domestic investors. Holdings of 30 percent or more are considered to be controlling stakes. The changes should lay the legal groundwork for an acceleration of the M & A industry. Heavy investment industries such as petro-chemical, automotive and power generation should be first sectors to experience increased M & A activity. |
New Technicians Wanted
Faced with a severe shortage of skilled technical workers - from car mechanics to locksmiths - amid soaring demand in the city, the Shanghai Labor and Social Security Bureau plans to offer more training and tests to cultivate professional technicians.
According to the bureau's survey there are some 87,700 "advanced technical workers" - technicians with the top-three grades based on a five-tier qualification system. These top-three grades account for 6 percent of the total local blue-collar workers, but industry officials said at present the city needs an additional 30,000 workers and the demand will keep rising.
Officials attributed the shortfall to the fact that many workers had recently retired, while most young people preferred white-collar jobs.
According to the bureau's blueprint, the ratio of "advanced technical workers" among total workers should increase 5 to 10 percentage points by 2005 from the current 6 percent. To meet this target, the bureau will launch more training programs.
In a nationwide pilot project, the central government has selected 100 companies and 100 schools in 30 cities throughout the nation, including Shanghai, to set up national technical worker training centers. Tests to qualify professional technical workers or technicians, first introduced in 1998, will cover nine more disciplines, such as Chinese cooking and jewelry designing, bringing the total to 35 by the end of this year.
(Source: Eastday.com)
Shanghai seeks MOFTEC approval for foreign help to restructure trading companies
Shanghai has applied to the Ministry of Foreign Trade and Economic Cooperation for more freedom to allow foreign companies to become involved in the restructuring of the city's state-owned foreign trade companies, according the city's foreign trade commission.
Shanghai wants to set up joint ventures with foreign companies to help its state-run trading houses cope with increasing competition from private trading companies and allow them to spin off their non-performing assets. Although Shanghai set up three joint venture trading firms in the Pudong new district in 1997, after approval from the State Council, no more joint ventures have been approved by the central government for the city.
Foreign companies are currently not allowed to set up wholly-owned import and export companies, but state-owned trading companies have been hit by the growth of private trading companies and private foreign joint ventures. Exports by state-owned foreign trading companies, which account for around a third of Shanghai's total, rose 8.18 pct in the first half, while local foreign-invested and private businesses with trading rights saw exports rising 24 and 64 percent, respectively.
(Source: AFX News - Asia)
Shanghai legal problem? Tell us about it. . . Mergers & Acquisitions * Incorporations * Commercial Contracts Contact Blaine Turnacliff at bturnacliff@lehmanlaw.com |
City plans its third ring road
To ease the ever-worsening traffic situation in downtown Shanghai, the city plans to build a third ring road between the existing inner and outer ring roads by 2007, officials announced yesterday.
The 70-kilometer-long Middle Ring Road, which will cost 500 million USD to build, will link a new elevated section of highway in the north, running above Wen-shui, Handan and Xiangyin roads, with a ground-level stretch of expressway to encircle downtown Pudong and Puxi, the Shanghai Municipal Engineering Administrative Bureau announced. The new ring road will cross the Huangpu River at two points, but officials have still not decided whether to use bridges or tunnels to cross the river,
During the past decade, the city constructed two ring roads totaling 150 kilometers and other thoroughfares like the Yan'an Elevated Road. However, judging from the ever-worsening traffic congestion, further planning and building must be completed. The city's traffic situation is going to get even worse over the next few years as the number of vehicles on local streets is expected to double by 2010. Currently there are about 1.12 million vehicles in the city, and the average driving speed on the city's highways is only slightly more than half of the posted speed limit.
In addition to building a new ring road, the city also plans to widen the Inner Ring Road from four lanes to six lanes and build 13 new highways, but work on these projects won't start until 2005 when northern and western sections of the new ring road open to traffic.
Bicycle and moped lanes on roads underneath the Inner Ring Road will be turned into car lanes in hopes of reducing congestion even further. Officials said they expect more than 20 percent of traffic on the current two ring roads to be transferred to the new eight-lane Middle Ring Road when the entire highway is open in 2007.
(Source: Shanghai Daily)
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NASDAQ setting up office in city
The NASDAQ Stock Market Inc. is launching its first Mainland Chinese office in Shanghai, in a bid to attract and help more Chinese venture capital seekers to move into the market. With three staff, the office is still in the preparation stage, its senior official said, but it has started its consultation service for the Mainland Chinese high-technology companies that are looking to go public in the US market.
The local NASDAQ office will make it convenient for Chinese companies to float shares in the NASDAQ market by helping with the paperwork and listing procedures. The official said the office has helped some Mainland Chinese companies to finance on the market by staking in some NASDAQ-listed companies, but she didn't specify which companies they are. She did say that some private high-tech companies in east China have good potential for success if they go to the NASDAQ market.
The NASDAQ China office also helps train personnel for the China Securities Regulatory Commission and Shanghai Stock Exchange, the official said. The current training service is provided free of charge.
(Source: Shanghai Daily)
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